HDB flat is 37 years old and son is only 8.

Reader says:
Good morning AK!
I am your avid follower since I attended the Tea with AK session some time back.
Have started my retirement planning since.

My wife n I have this HDB lease concern. Flat is 37 yr old (and my son is only 8). Recently Lawrence Wong brought it up again. My wife want to sell and buy new flat in Seng kang. New lease 99 years so that can give my son and also preserve the value but I don't think it is a good idea. From mature to non mature estate. How ah? Appreciate your advice .

AK says:
It depends on what matters more to you. 🙂
Location or legacy? 😉


http://www.straitstimes.com/singapore/housing/to-buy-an-old-hdb-flat-or-not-that-is-the-question
Of course, this is not a new topic in my blog. Newer readers of ASSI who are interested might want to read the related posts below.

Related posts:
1. Resale flat or BTO in Bidadari?
2. Purchasing HDB flat new or old?
3. Buy 99 years leasehold or freehold?
"As many people have observed, owners of 40-year-old flats may find it harder to offload their homes to new buyers now, as people become more aware of the risks involved in taking on a home with a fading lease. "
Source: The Straits Times

Lending money to family and friends?

Reader:

Dear AK,

What do you do when people borrow money from you?

Everytime a friend called to borrow some money, I will always remind myself that many years ago I also seek help, a friend lend me a few thousands dollars. I worked hard and repay. So whenever friends seek help, I help them.

After a while, I found that most are unable to pay back... Actually, one of them even bought a few property investments later but did not return money he borrowed from me. It has become difficult for me.

Last week, a friend want to borrow 1K. He is fed up that for only 1K, I ask this ask that... So, I told him that I am financially tight and unable to lend him money.

AK replies:

Hi,

I can understand your situation and this is something that I have blogged about too.

"I was taught that if we should lend someone money, we must do it with the mindset of a donor."
See:
http://singaporeanstocksinvestor.blogspot.sg/2013/01/the-difference-between-lending-and.html

Of course, there are always reasons which I find more acceptable and in those instances, I am prepared to part with some money. Yes, the operative word here is "part".

"Imagine that the money has vaporised and gone to a better place. If it should come back one day, well, go celebrate!"
See:
http://singaporeanstocksinvestor.blogspot.sg/2013/10/lending-money-to-someone-you-care-about.html

Sometimes, for legitimate reasons, people need a helping hand and if they are people who matter to me, I will help. :)

Best wishes,
AK

$100,000 lesson from Marco Polo Marine.

I always say that I have been mostly lucky as an investor. The operative word is "mostly".

Long time readers would remember the narrative for Marco Polo Marine, a business which transformed from a tugs and barges operator, it was doing all the right things to grow stronger, adding value over the years. 

In fact, Marco Polo Marine weathered the Global Financial Crisis well and remained profitable even through bad times. That says something about their management.




When I decided to invest in Marco Polo Marine, I noticed persistent insider buying a few years ago and their prospects were good. They started to pay meaningful dividends too. 

It was likely that, conditions permitting, dividends would continue as the founding family had a 60% stake in the business and they still do.

So, what went wrong?

Marco Polo Marine is in a cyclical industry and in a cyclical industry, we have to expect down cycles. They managed to survive previous down cycles because they were more conservative. 

That is a lesson from this episode.




Any company in a cyclical industry might want to be more conservative because we don't know when things might go down and for how long they might stay in the doldrums. Trying to do too much with a weak balance sheet could be dangerous.

I have said before that if a highly geared business has strong cash flow, then, it could cope with its debt. Yes, it is about having a healthy interest cover ratio. This was from 2015:

This was why I avoided the likes of Otto Marine although some of us might remember how there were write ups on how they changed their business model and things could become better. It was all too speculative for me. 

I didn't buy into Nam Cheong as well because they were building vessels in anticipation of buyers which looked smart during good times. 




Swiber, I avoided and I probably blogged or talked about avoiding their bonds too.

Comparatively, Marco Polo Marine, to me, was a safer investment although it was a smaller business. 

Unfortunately, when bad times strike, cash flow could dry up, especially when the bad times have lasted as long as they have for the O&G businesses. This dry spell has been the worst and the longest for the industry.




I am not writing off Marco Polo Marine yet because it is not over until it is over. However, although they are not a Swiber, there is a chance that Marco Polo Marine might suffer the same fate. If that should come to pass, I will have to write off what was once upon a time a $100,000 investment.

Related post:
Cutting or holding MPM?

Good time to buy investment property now.

"There were no worries. It was easy money."





Dear AK,
Morgan Stanley thinks that property prices in Singapore will double by 2030. 
Is a good time to buy investment property now?

Source: AsiaOne.

AK replies:
No one can say what the future holds with total confidence. Of course, people could and some would continue to make predictions for any number of reasons.

I do know that there were times in the past and also the recent past when we could get rental yields of 5% and even close to 6% in Singapore for a residential property. Although it does not adhere to the Rule of 15, in Singapore, that is probably pretty good.





Now, we are probably looking at rental yields of around 3% or, often, even lower and I have said before that this only looks attractive because of the very low interest rate environment. I don't know but did Morgan Stanley say interest rates are rising?

See: 
Rule of 15.





Having said this, I will say that there are always good investments to be found. It might be more difficult to find them but, probably, they are out there somewhere. What is a good investment? Well, it is probably safe to say that it is one that offers good value for money.

See: 
Affordability and value for money.





I acknowledge that I do not know everything there is to know and I definitely do not know what the future holds but I do know that if we wish to speculate, we must have deep pockets. 

Speculators should know that they are speculating and not investing.





See: 
Questions to ask.

Finally, of course, we could make quite a bit of money from speculating. We just have to be lucky.

Related post:
Disastrous investments in real estate.

Structural Unemployment. (Having face more important than having food?)

Someone told me a friend of his has been unemployed for more than a year and recently approached him for a loan. 

Apparently, the kind of work his friend was doing is increasingly hard to find.

It sounds to me like another case of structural unemployment.





It brings to mind a comment I made not too long ago here in my blog:

"The world has been disrupted and will continue to be disrupted by technology.

"It is happening faster than ever.

"If we were to go to sleep and wake up 5 or 10 years later, we might get a shock.

"Many will lose their jobs because of the disruption.

"The old economy is under siege.

"I know because I belong to the old economy.

"If I am not financially healthy today, I would be very worried."




Being financially literate is important but being financially savvy is even more important. 

However, there is an even more important point of this blog post. 

We should be pragmatic.




This person has been offered a job in a different industry but he rejected. 

It is a "dirty" job, apparently, and doesn't pay as well as his old job.

Is having face more important than having food on the table?





Related posts:
1. Be a plumber or be unemployed?
2. Compared to anger, shame is worse.

Know how to grow our CPF savings.

I think there are quite a few readers who are confused about the difference between contributing to their CPF account and topping up their CPF account. 

I understand their confusion. Once upon a time, I was confused too.




1. There is such a thing as the CPF annual contribution limit. Basically, our mandatory contribution (MC) and voluntary contribution (VC), if any, cannot exceed the annual contribution limit. 

See:
CPF Annual Limit and VC.

If we are working, chances are we are contributing to our CPF account. That is required by law. So, it is called mandatory contribution (MC).

If our MC does not hit the annual contribution limit, we can do VC to hit that limit.

VC can either be done purely to our CPF Medisave Account (MA) which then gives us income tax relief or it can be a regular VC which the CPF Board will apportion to our OA, SA and MA (or just the OA and SA if our MA has already hit the ceiling). A regular VC does not give us income tax relief.

For more information, see: 
Online contribution to MA.
and

VC to my CPF accounts.






2. There is also the option to top up our CPF Special Account (SA). Known as minimum sum top up (MSTU), this is not subjected to the annual contribution limit. 

The MSTU is instead limited by the prevailing minimum sum (MS) or what is now known as the full retirement sum (FRS). We get income tax relief for the first $7,000 of MSTU every year.

For more information, see:
MSTU and interest computation.




So, do you want to contribute to your CPF account or do you want to top up your CPF account? 

To the CPF Board, this is not simply a case of semantics.

Please read the following blog for updates:
CPF Amendment Bill 2021.

Emails on investments and the CPF.

I have been spending more time on a new hobby. Online gaming! 

No, don't worry. It is not of the casino variety. It is a MMORPG. 

What is this? Massively multiplayer online role-playing game. For more information: MMORPG.





The game is "Neverwinter" by Dungeons & Dragons. I am amazed that something like this is available to play free of charge! 

I remember "Diablo" by Blizzard was quite pricey. I waited for the price to come down before buying many years ago.

Anyway, if you get the feeling that I am spending less time blogging, you are right. So many hobbies and so little time. Cham.

It is so realistic but nowhere like SAO (Sword Art Online) of course. I wonder whether SAO's gaming technology would ever become reality.

Can you spot "Neverwinter"?

Reader #1:
Hi AK, I'm your new blog follower since last mth and wanted to ask you what's your advise on an effective approach to investment planning.
I remember you were saying need to have war chest (to take advantage when mkt downturn), emergency funds, investment etc but how do you apportion if let say I have $100k? Thank you.





AK:
Welcome to my blog. 🙂
I dun give advice. I am not allowed to. I am just a blogger talking to myself 😉
Anyway, without knowing your situation well, I can only talk in general.
So, I believe this blog post might interest you:
http://singaporeanstocksinvestor.blogspot.sg/2014/03/graduating-soon-take-steps-towards.html
And this:
http://singaporeanstocksinvestor.blogspot.sg/2015/05/how-much-should-we-have-in-our.html
Watch the video:

"How To Build A Budget?"





Reader #2:
Hi AK, i have been one of your silent reader and have benefited much from your blogs.
Today, i saw that AEM share price has dropped by quite a lot. But i don't understand why
I suspect it may be due to the bonus offer that was exercised today
But i don't understand what does the bonus offer means
And i cant find much info on it as well
Hence, i will like to consult you and learn at the same time





AK:
I am not a consultant. I am just a blogger. 😉
I am not allowed to give advice de. 😞
Anyway, this is the first time I have heard of AEM. Not familiar with this.
Bonus issue?
"Bonus shares are shares distributed by a company to its current shareholders as fully paid shares free of charge."
Source: https://en.wikipedia.org/wiki/Bonus_share






Reader #3:
Hello sir,
Would you advise for
1) OA = 40%
2) SA = 60%
or ????
No need for MA ? Bcos got insurance liao.





AK:
Always need MA. 😉
http://singaporeanstocksinvestor.blogspot.sg/2013/12/how-to-get-free-medical-insurance-in.html
How much you want to put in each CPF account depends on what you want to achieve.
SA is for retirement funding. Cannot be used for anything else. 😉
(Of course, if our CPF-SA were to exceed the FRS by quite a bit when we are 55, we could withdraw a tidy lump sum from our CPF-SA while the FRS goes into our CPF-RA. We could then use the withdrawn money for anything we want.)






Remember, AK is not a consultant. 

AK doesn't give advice. 

AK is just a blogger.

Go hit CPF MS or FRS by age 40!

Reader says...

I am currently 37 years old. 

I am working towards the target of hitting my CPF mininum sum by the age of 40.

The current balance in my SA is about 80k. 

My OA account balance is zero as I have transferred all my OA to my SA account. 

I have already hit the max limit for my MA of 52k. 

After reading your blog, I top up at the start of the year to receive free $88 ang pow. :)

I have fully repay my 4 room HDB loan and me and my wife have more then 6 months of emergency funds. 

Me and my wife has no other loans or liabilities.

I am thinking of contributing a lump sum cash contribution of 30k into my CPF SA so that the base amount is bigger and compounding at 4% a year means I can probably reach the minimum sum of 181k when I am 40. 

After that I just let time be my friend and let it do the compounding magic.

I am currently still working as well so I will have CPF contribution as well.

Do you think this is a good idea? 

I do understand that only up to 7k of cash contribution is entitled to tax relief.

Thanks for your help and looking to hear from you.

AK says...

It would depend on whether that tax relief from doing Minimum Sum Top Up (MSTU) is important to you. 

If it is, limit yourself to a MSTU of $7K a year. 

This is especially pertinent if you happen to be a high income earner. ;)







Related posts:
1. VC to MA and get a $88 ang bao.
2. $1.2 million in CPF by age 65?

What do you need as an investor?

This conversation took place when IREIT Global's unit price declined to 71.5c after going XD not too long ago.

AK bought more.




And this was another conversation with another reader at around the same time, maybe, about 2 days apart:

Reader:
Hi AK, I'm on of your readers. I'd like to know what you think of IREIT Global, which I understand you have in your portfolio. 

Recently, the stock seems to have taken a beating after going ex-dividend. Some days the drop in stock price is on large volume. 

Do you think there's anything to be concerned about, now that there is new management?

Sorry if i contacted you via the wrong channel, couldn't find any email address on your page






AK:
I don't know why the price fell. 😉
I only know that I bought more because lower price means better value for me.

Reader:
Ok thanks, that's reassuring coming from you 🙂

AK:
Oh, I don't mean to reassure you or anything like that.
If you need reassurance from me, cham...
Know what you want. Know if something does the job for you.

See:
http://singaporeanstocksinvestor.blogspot.sg/2017/02/would-ak-invest-in-ireit-global-today.html#comments
Would AK invest in IREIT Global today?




Reader:
Haha no I am planning to hold and not sell. But I find that your judgment is good so just wanted to check with you if there's anything I missed, be it in the results or whatever, that could be cause for concern

So that's what I mean by reassuring, I.e, no specific concerns and no specific reasons for the price decrease

AK:
I dunno everything de
We must accept that we dun hv perfect knowledge
which is why position sizing and war chest are important

See:
http://singaporeanstocksinvestor.blogspot.sg/2015/02/how-to-have-peace-of-mind-as-investor.html
How to have peace of mind as an investor?

Reader:
Yeah that's true. Thanks for the advice 🙂

I only started to take charge of my portfolio one year ago.

So it's good to have someone like you that writes investing advice





AK:
I dun give advice de
BYHW

Reader:
I also invest in US stocks. So far I didn't notice any articles in your blog about US stocks. Do you have any position?

AK:
No lah. I dun have so much money. Singapore market very big for me liao.

Reader:
I'm new to investing so I have a lot to learn

AK:
All in good time. No rush.

So, what do you need as an investor? 

Do you need reassurance or something else?

Related posts:
1. Investor psychology and fear.
2. When to BUY, SELL or HOLD?

Huge losses from trading but tempted to restart.

Hi AK,

I am always tempted to trade and also I see many courses out there on trading and saying that they have earn so much from trading. I never sign up for any of them but there is always a temptation.

should i go and attend trading course and start trading again which I have made huge losses before, or do the AK way, be patient, be pragmatic , be prudent? ie just do income investing?

Hi,

There are different ways to make money in the stock market. 

We just have to find a way that we are good at, a way that suits our temperament.

You should know yourself best. ;)

Best wishes,
AK

Please see related posts below.

Related posts:
1. Trading to put food on table.
2. Trading for extra money.
3. Find our own way to be richer.

What makes us powerful?

This is part of a conversation with a reader:

Reader:
Ur life many admire. world is fighting inside and outside.
You don't need to. That is God greatest gift.
U op for peace.

AK:
I dun wan to either
Peace of mind is priceless

Reader:
If you want fame you won't be wearing mask. You are intelligent enough to know the power and influence of you have over follower and if you had wanted you probably could reap many benefits. But that is not you.

AK:
Privacy is precious
Once lost, it is gone forever.

Reader:
Bc of that the world has not hold on you. That is power! 💪🏻

AK:
Wah! The way you put it makes me feel powerful!

A public service by ASSI.

Trump is full of shit.

I have been asked before to turn my blogging activity into a business but I want to keep blogging as a hobby. Some don't understand why.

I shall end the blog by quoting Ayn Rand, a Russian philosopher:

Related post:
Who is AK?

Financial freedom and not enough time (UPDATED).

I met three friends for lunch a few days ago. 

They are all financially free, having sufficient passive income to meet their expenses in life and more. 

They do not spend time chasing after money now.

We talked about a mutual friend of ours who is richer than any of us but seems to be more interested in getting even richer faster, sacrificing what we thought were more important things in life in doing so.











We only need so much money in life. 

The rest is for showing off. 

To be financially free, ultimately, is to be free from working for money.

What is the point of having more than enough money but not enough time to live life the way we want to?





Life is too fragile and I decided to be nicer to myself after a series of unfortunate events which happened in the last couple of years.

A friend told me some time ago:

"You worked so hard for financial freedom. You have the resources to do whatever you want to do now. You should."

Yesterday, I said something similar to another friend who has achieved financial freedom but still drags himself to work because he thinks he doesn't have enough money. 

For some, it could one day be a case of having too much money and not enough time.


We should know when we have enough money so that we can have more time.




How Jack Ma sees his retirement?

“When I retired from the CEO position, I told the CEO team (in 2013) I should have more time playing golf on the beach.

“But I find, oh my God, spent 870 hours in the air last year, and this year, 1,000 hours,” said Ma.

“The thing is, I don’t want to die in my office. I want to die on the beach.”

He famously said his “biggest mistake was I made Alibaba”, because of the enormous pressure and responsibility he has had to shoulder to steer the US$420 billion company with more than 86,000 employees.

“I was just trying to do a small business and [not] grow that big, take that many responsibilities and get so much trouble.

“Every day is like being as busy as a president, and I don’t have any power. I don’t have my life,” Ma said. (Source: SCMP)





Related post:

Three point turn.

1Q 2017 passive income from non-REITs.

Japan is rising from recession. Produced by NHK Int'l.

In my last blog, we saw that I made some changes in my S-REITs portfolio in 1Q 2017. Regular readers might recall that the quarter also saw some changes in my non-REITs portfolio.

I made the following changes to my non-REITs portfolio:

1. Increased my investment in APTT and then sold it within 2 months.

See: Sold APTT at higher price.

2. Increased my investment in QAF Limited.

See: What is QAF really worth?

3. Invested in Kingsmen Creatives.

See: Kingsmen Creatives Limited.

4. Increased my investment in Religare Health Trust.

See: Increased investment in RHT.

5. Invested in Centurion.

See: Centurion Corporation Limited.

6. Invested in Guocoland.

See: Guocoland and Mr Quek.


Eco World, GuocoLand to hold 27% stake each.

Quite a few changes, I must say, and, naturally, my cash position is very much lower now. Off the top of my head, cash is probably at less than 20%.

More than 80% invested is a big deal to me. It is probably a big deal for any regular retail investor who believes in always having a war chest ready.

Unless Mr. Market should throw me prices much lower than the current levels, all else remaining equal, I really wouldn't be adding. 






I received income from the following non-REITs in 1Q 2017:

1. Singtel
2. Tai Sin
3. APTT 
4. APSF
5. Croesus

Total income received from non-REITs, with Croesus Retail Trust being the biggest contributor, in 1Q 2016 is:

$13,543.31

This gives me about $4,514 a month.

Together with income received from S-REITs, I suppose 1Q 2017 turned out pretty well.






I get enough to cover all my expenses and more. So, I am able to do voluntary contribution to my CPF account and also put some money in my war chest. Now, back to my game.

See: 
Make $1 million investing for income?

Related post:
1Q 2016 income from non-REITs.

1Q 2017 passive income from S-REITs.

"What is the interest rate risk of REIT investments? Interest rates only represent a portion of the overall equation."

Time flies. It is time for another quarterly update.

In 1Q 2017, I received income from the following S-REITs:

1. AA REIT

2. First REIT

3. IREIT 

4. CRCT

5. Soilbuild REIT

6. Cache Log Trust

7. K-REIT

8. FCOT

9. Suntec REIT

10. LMIR

11. CIT

12. Sabana REIT

My largest investments in the S-REITs universe are still in AA REIT and First REIT. The others are relatively small investments with IREIT and Soilbuild REIT being slightly larger.

In 1Q 2017, I made the following changes to my S-REITs portfolio:

1. Invested in Frasers L&I Trust (FLT).

2. Invested in CapitaRetail China Trust (CRCT).

See: FLT & CRCT added.

3. Took part in Sabana REIT's rights issue.

See: History with Sabana REIT.

4. Invested in Starhill Global REIT (SGR).

See: Online shopping and SGR.

5. Added to my investment in IREIT.

See: Would AK invest in IREIT?

Everything remaining equal, I don't think I will be making new investments or adding to any investment in the S-REITs space. I am pretty comfortable with what I have now.

So, how much income did I receive in 1Q 2017?

$ 21,477.10

This gives me about $7,159.00 a month which is a big reduction from a year ago.

Of course, what is missing is the income distribution from Saizen REIT.

Full year income, although reduced, from S-REITs should still be quite comfortable due to expected contributions from new investments in FLT, CRCT and SGR as well as a larger investment in IREIT.

I will be sharing the numbers for investments in non-REITs in my next blog.

Related post:
1Q 2016 income from S-REITs.

An opinion of Soilbuild REIT.

This came about because of my comment on Facebook that "There are sponsors who are mainly interested to use their REITs to sell their assets to. REITs are their ATMs."

Reader:
Soilbuild owner also use the REIT to sell property right?

AK:
Must see how it is done. 😉
If sponsor sells property with rental support, usually, it is a sign that the property is overpriced.

Reader:
hmmm
Because I haven't heard many favourable talk about soilbuild owner

AK:
Oh, neither have I 😜
But if we are on the same side, it is OK.
LOL
If he hurts me, he hurts himself. 😉

Reader:
Haha I thinking just buy in those with solid management
at good prices
Less headache

AK:
Now, difficult.
So, I settle for good management at OK prices.
Or OK management at good prices. 😜
OK management at OK prices, I also take a bit.

Reader:
Because what I read so far is similar to OUE, soilbuild owner treat the reit as dumping ground to unlock cash

AK:
Eh... I dun see it leh... They do sell but they dun dump. No financial engineering as compared to OUE or Keppel.
Selling does not equal dumping.

Reader:
Sponsor is weak also

AK:
OK. If you say that, OUE and Keppel are strong sponsors. 😉
I like to see what they do and decide.
Saizen REIT didn't have strong sponsor.

Reader:
(Some concerns with valuations of assets.)

AK:
Book value and market value har?
The best way of looking at whether valuations are realistic is to look at market prices.
When a property like XXXXXX was delisted (together with Soilbuild) many years ago, it was undervalued. Of course, when relisted, they want to list at market value.

Reader:
haha I more conservative just worried owner play punk
if own also carry small position only

AK:
I think Soilbuild towkay has business savvy but not crooked.

Reader:
me KIV until better, I also don't like the heavy exposure to O&G

AK:
I remember the towkay has a 25% stake in the REIT. That is not a small stake.

Note:
Although Soilbuild REIT's business parks are attractive assets to own, it is true that their exposure to the O&G sector is a cause for concern. 

With Technics going bust, I estimated that 10% of their income is affected. I believe that Mr. Market has priced this in. 

If the entire O&G sector goes kaput, I guess that is when we might see Soilbuild REIT being punished by Mr. Market and its unit price could decline another 20%, maybe. This is improbable but possible.

Related post:
AA REIT, Soilbuild REIT and VIT.